Yes, that is Kobo, not Kindle.
So now there's *two* KSOs. I guess we'll have to go with KinSO and KoSO to keeep'em straight.
It's been six months since the first KinSO so it was about time somebody else gave it a shot.

I'm confident that there will always be ad-free ereaders. After all, one of their many appeals is a distraction free reading environment.

There is also the question of how much value the companies derive from the ads themselves. Advertising was probably quite valuable when the readers cost over $300 -- the buyers were people with deep pockets and likely represented a smaller and easier to target demographic. But these ads are being used to push ereaders under $100.

I also wonder how many people would end up buying these SO devices and using hacked firmware if ad-infected devices became the only option. After all, the Kobo is fairly open (so much so that I wonder why so few people are hacking it). And while I can't speak for the latest Kindle, there was replacement software for the Kindle.

I'm not sure how long ad-supported readers will last
Last century's ad-supported PCs didn't last more than a year or two.
And Amazon not only sells ad-free Kindles across the board, they also allow consumers to change their minds and convert to ad-free. So the whole category might be a short-lived marketshare grab before current-tech reader sales plateau. (Which is coming.)

The whole point of Kobo doing this now is, first and foremost, to be able to advertise the magic $99 price point without having to bite the bullet and lower the MSRP across the board the way B&N did. It allows them to match the current entry-level US pricing without annoying buyers elsewhere by making it a "different" product which needs local partners and thus can't be shipped outside the US.

If it turns out that Amazon's claims are true and the ad-supported readers do outsell the ad-free models, well, that would give them a leg up on B&N even if the ads only bring in a trickle of revenue. Wouldn't surprise me if the KoSO were a preemptive strike at B&Ns international ambitions.

Unless all these gadgets are a lot cheaper to build than the iSuppli's of the word are telling us, the battle for the US market is now officially an endurance contest for second place and the title of "Top Epub reader", to serve as a springboard into the undeveloped markets of europe.

Anyway, whether ad-supported readers endure or not, there will always be ad-free choices.
They'll just be pricier.

Between having to develop the device and having to find partners for the ads (unlike Amazon which self-references) you can be sure that this has been in the works for awhile. I can see this coming to other countries if the new owners build-out buy.com in those countries in the way they have in the US. Right now the Canadian version of buy.com is very, very limited.

I'm not sure how long ad-supported readers will last
Last century's ad-supported PCs didn't last more than a year or two.
And Amazon not only sells ad-free Kindles across the board, they also allow consumers to change their minds and convert to ad-free. So the whole category might be a short-lived marketshare grab before current-tech reader sales plateau. (Which is coming.)

I had mercifully forgotten the ad-supported PCs.

But I don't think that these books have much in common with that poorly thought out idea - IIRC, all of the work you did on your computer basically took place in a window, with ads being around the outside. So even if you were writing a word document, (or maybe a WordStar document; I think this was a while ago), you would be exposed to the ads. I remember wondering whether I could cut out a cardboard frame and tape it to the monitor so that it would always hide the ads. The savings were pretty substantial - I think at a time where computers basically cost $1,000, you could buy one with ads for $99.

Quote:

The whole point of Kobo doing this now is, first and foremost, to be able to advertise the magic $99 price point without having to bite the bullet and lower the MSRP across the board the way B&N did. It allows them to match the current entry-level US pricing without annoying buyers elsewhere by making it a "different" product which needs local partners and thus can't be shipped outside the US.

I think that's probably right. It is also nice for Kobo that Amazon has already demonstrated that this works - there was some risk that ad-supported readers would not be accepted, and the downside of this risk would have been much greater for a smaller brand like Kobo than for Amazon.

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If it turns out that Amazon's claims are true and the ad-supported readers do outsell the ad-free models, well, that would give them a leg up on B&N even if the ads only bring in a trickle of revenue. Wouldn't surprise me if the KoSO were a preemptive strike at B&Ns international ambitions.

In the short term B&N and Sony are Kobo's immediate competition. If you are locked into the Epub infrastructure, it's trivial to switch to B&N or Sony, and more complicated to switch to Amazon. If ads allow you a $40-$50 discount over those rivals (or a lesser discount plus increased profit), you will be in much better shape. B&N, also, unlike Sony or Kobo, seems to make more from sales at its own store, and so can afford to price the devices less. This helps even that out.

Quote:

Unless all these gadgets are a lot cheaper to build than the iSuppli's of the word are telling us, the battle for the US market is now officially an endurance contest for second place and the title of "Top Epub reader", to serve as a springboard into the undeveloped markets of europe.

Probably true. They should also need to move quickly into the continental European market before Epub becomes secondary to Kindle as very quickly happened in the UK.

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Anyway, whether ad-supported readers endure or not, there will always be ad-free choices.
They'll just be pricier.

I think this is right, and I hope that you will have the option of buying a subsidized e-reader and then paying to remove the ads. For most new e-reader buyers (I believe; this was true in the case of me and people I know), there is a lot of trepidation associated with buying the first e-reader. These people have read books all their lives, have heard good things about e-readers, but also probably don't like reading on their computer screens, and so are very suspicious about whether they will actually like reading on a screen. (And it doesn't help that advertising e-ink on LCD screens is a lot like advertising color TVs on B&W TVs - you can't really appreciate the difference). So getting the initial cost as low as possible is important because customers are afraid that they may end up not using the reader and thus wasting the money they spent.

As ereader prices go down, interest in ad-supported readers might also diminish, because of decreased price-sensitivity. An ereader is not like a magazine, where you keep it for only a short amount of time and then buy a new one.

I wonder how B&N is going to keep up, though. Will they also introduce a cheap, low-end model to compete with the Kindle Non-Touch? Are they taking a loss on the $99 Nook STR?

What is definitely known is that Amazon is taking a much lower total loss (if any) than B&N; the K4, which is undoubtedly cheaper to build than the Nook STR, is estimated to cost around $79 to build.

With an ad-free retail of $109 for the K4 (and $139 for the KT and KK) and an undetermined ad-revenue stream, Amazon might even be turning a decent profit on the entire Kindle hardware operation even if individual unit sales of the KinSOs might generate a loss.

B&N has no such option; their $99 price is across the board, for every STR.

Going by the K4 estimate they might at best be (barely) breaking even on partner B&M sales and earning a modest profit on online sales. Where they are likely taking a bath is the $79 full-warranty refurb STRs and the warehousing of the remaining original Nooks. They also aren't likely enjoying much profit on the refurb NCs.

Also undetermined is how much ebook revenue each ereader generates; the attach rate (in console gaming parlance). But since that revenue will only manifest slowly over time, the possibility of B&N running into a liquidity crunch is non-zero if they are in fact losing money on the hardware.

As ereader prices go down, interest in ad-supported readers might also diminish, because of decreased price-sensitivity. An ereader is not like a magazine, where you keep it for only a short amount of time and then buy a new one.

I wonder how B&N is going to keep up, though. Will they also introduce a cheap, low-end model to compete with the Kindle Non-Touch? Are they taking a loss on the $99 Nook STR?

Most likely they are: Which is why an ad-supported B&N model is inevitable. I see no evidence at all that an ad-supported ereader is a " passing fad". Buyers of ad-supported ereaders love their devices and Amazon has made the ad-supported model the default option, with the ad-free model being the alternative.
B&N may also do a cheap, no-touch alternative.Its clear to me that PRICE, not lack of ads, is driving the ereader market. If that were not the case, B&N would be touting the freedom from ads on their devices and would not be lowering their prices
About all that can be drawn from the failure of the ad-supported PC experiment is that ad support doesn't work everywhere and in all circumstances, and that implementation matters.

Most likely they are: Which is why an ad-supported B&N model is inevitable. I see no evidence at all that an ad-supported ereader is a " passing fad". Buyers of ad-supported ereaders love their devices and Amazon has made the ad-supported model the default option, with the ad-free model being the alternative.
B&N may also do a cheap, no-touch alternative.Its clear to me that PRICE, not lack of ads, is driving the ereader market. If that were not the case, B&N would be touting the freedom from ads on their devices and would not be lowering their prices
About all that can be drawn from the failure of the ad-supported PC experiment is that ad support doesn't work everywhere and in all circumstances, and that implementation matters.

Yup!
Implementation matters, which is why Amazon bills the Kindle ads as "Special Offers" while B&N pretends their home screen doesn't already devote a third of the screen to ads. (They reallly shouldn't harp too strongly on the Kindle and Kobo ads or they'll be risking a backlash over their, literally, self-serving ads.)

Ad-supported readers may be with us for a while but there is no guarantee they will be around forever, precisely because price matters, but it is not the only thing that matters. Not to the vendor or to the ad-buyer. (Or *all* buyers.)

As the hardware gets cheaper and the ad-free price drops, the ad-support discount starts to overwhelms the price, rendering the readers essentially (if not literally) free. Which changes the owner profile.

Part of the reason Amazon (and Kobo) can offer the SO discount is that ebook readers attract a highly desirable demographic to the advertisers; it is targetted advertising that is, on paper, more effective in reaching the potential customer than carpetbombing the internet with banner ads.

Most people buy ebook readers to read, not to stick them in a closet. But once the price goes down much lower than where it is, you'll start getting a lot of owners who use them for a few weeks and then forget about the reader for months. And the value of the discount to the advertiser will perforce go down.

We're already seeing it with the Kindles: the K4 gets a $30 discount (which is more like $20, since it really should sell for $99, ad-free) while the K Touch gets a nominal $50 discount (again, more like $30-40.) A next gen K5 might come in at $69 ad-free and $49 in a Special Offers model, which might not be enough of a spread to bother unless Amazon started profiling the devices individually, a can of worms not worth the effort.

Amusingly, the Special Offers that today are greasing entry level sales, may in the future be more productively re-targetted to higher-end readers, say the 3G Kindles and future color models where a $50+ ad-supported discount might make the difference between a $299-249 price point and the magical $199.

That ad-supported readers have gotten this far is enouh of a surprise; they might proliferate even more or wear out their welcome and vanish by next xmas. So far, Kobo seems to be betting on the former and B&N on the latter.